Buckingham Connects Quarterly Webinar: September 2023

Buckingham thought leaders’ discuss U.S. and global market performance, tax planning considerations, and other financial planning topics.

During this recorded webinar, Chief Investment Officer Kevin Grogan, CFA, CFP®  gave an update on year-to-date market performance and shared why recession predictions for this year may be overblown. Chief Planning Officer Jeffrey Levine, CFP®, CPA, PFS, CWS, AIF, RICP, ChFC®, BFA touched on timely planning topics, including protecting yourself from cybersecurity risks, financial tips for teenagers who earned money in part-time jobs this summer, and an update on what taxpayers should know about state and local tax deductions. Buckingham Strategic Wealth President Wendy Hartman, CFP® covered what to know about the TD Ameritrade and Charles Schwab merger, changes affecting required minimum distributions (RMDs), and charitable giving strategies to consider before the year is over.

6 Steps to Plan for a Future Inheritance

Within the next 20 years, trillions of dollars are expected to be passed between generations. Whether you’re expecting a life-changing inheritance, a modest inheritance or maybe not anything, it’s an important situation to think about. Although everyone’s situation will be different, there are steps you can take to make sure the transfer of wealth goes smoothly.

1. Take care of yourself mentally and emotionally.

Coping with the loss of a loved one can be one of the hardest things to go through in life. Anticipating that can be equally as hard. Before you even get started on the financial aspect of an inheritance, it’s crucial to address the personal aspect, first and foremost. Make sure you are mentally and emotionally prepared to begin these conversations. Take care of yourself.

2. Communicate early on.

Whether you’re the one who will inherit wealth or will transfer wealth upon death, conversations about this topic can be uncomfortable. However, the loss of a loved one is something everyone experiences. Communicating in advance is a good way for everyone to get on the same page and know what to expect. It’s better to have answers to hard questions than to be left wondering when there’s no one around to answer them. Knowing what your predecessor’s estate plan consists of, for example, can help smooth uncertainty when the time comes to distribute their wealth.

In addition to communicating with your predecessors, if you are married, it’s equally important to communicate with your spouse. Often one spouse inherits wealth without having any prior conversations with the other spouse about how it will be used. Couples who haven’t planned may disagree on how to allocate these assets once received, leading to more uncertainty and stress during an already difficult time.

3. Make sure your own affairs are in order.

It’s always beneficial to revisit your own financial plan after a significant change, but it’s a better time before change happens. Take the time to make sure your financial affairs are in order. Try putting yourself in your predecessor’s shoes if you’re on the receiving end of the wealth transfer. How would you want the experience to go? What would you want your beneficiaries, heirs or legatees to know beforehand?

4. Know the legal and tax consequences in your respective state.

One should consider the tax and legal consequences of inheriting assets at both the federal and state level. Twelve states have an estate tax separate from the federal estate tax, and six states have an inheritance tax. These taxes can result in less being passed on.

Different assets and asset ownership types have different treatments. For example, investment accounts are typically more straightforward than real estate or ownership in private businesses. Another example is the nine states that have community property laws, which means that for married couples in these states, any assets acquired after marriage belong to both spouses equally. Such laws further complicate the potential distribution of assets and are another reason to plan for inheritance early.

5. Don’t count your eggs before they hatch.

No matter how likely the inheritance is, making major decisions based on anticipation of what’s to come is not a wise strategy. You don’t necessarily want to decide on retiring earlier than planned because of an inheritance that pushes you over the finish line. Depending on your situation, it may make sense to factor an inheritance into your retirement plan, but it’s best to be conservative with your expectations. If you make a decision based on possible outcomes, you could be in trouble if they don’t happen. If you wait to make a decision and the anticipated outcome happens, you still win.

A few reasons not to make a premature decision are:

  • Probate costs – probate costs can take a significant amount out of an estate before it reaches beneficiaries.
  • Creditors – creditors have a right to collect, and a good time for them may be upon passing of the debtor.
  • Taxes – there may be estate taxes, inheritance taxes or even unpaid taxes from prior years, all of which Uncle Sam has the right to collect.
  • Medical costs – medical costs can be incurred up until the last days of someone’s life. Although government programs like Medicare can cover certain end-of-life care expenses, these final medical costs can go unaccounted for or underestimated and can result in a lower estate value.
  • Owner may change their mind – even if someone promises to pass on wealth, they can choose to allocate the wealth elsewhere or spend it all without you knowing.
  • Value of assets decrease – if someone has their wealth tied up in capital markets, that wealth is subject to precipitous drops. Assets in the stock market can lose 10% in a day, and real estate assets can have their value cut in half in a matter of weeks. Although markets typically rebound after such declines, no one has a crystal ball to know when exactly these events will happen.

6. Seek help from a professional, wherever necessary.

If you don’t know how to prepare for or handle an inheritance when it comes, it may end up being worth little to nothing. Professionals in law, accounting and financial planning who specialize in this situation can offer their experience and knowledge. Even if you’re well versed in these areas, you may benefit from an outside party’s guidance as family wealth transfers can become complicated. Reach out to your advisor if you have questions about ensuring you are prepared to receive an inheritance.

If you are not currently working with an advisor, we would love to help answer your questions on inheritance planning. Please schedule a short phone call or virtual conversation with one of our advisors.

Should You Allocate 100% of your Portfolio to Fixed Income?

Is it wise to allocate 100% of your portfolio to fixed income? In this episode of Buckingham Weekly Perspectives, Head of Investment Research Jared Kizer shares why this strategy has gained popularity recently and the surprising reasons why we don’t recommend this approach for most investors.


Jared Kizer: All right. So today I’m going to tackle a question that I recently got from a client that I think is a good topic to tackle, which is the question of are there any scenarios where I should allocate all of my wealth to fixed income without any allocation to say stocks or alternatives of any kind? Are there scenarios where that makes sense? Want to talk about that today and basically think there are a couple of cases, but by and large we’re going to talk about why we think that doesn’t make sense. Interesting question nevertheless to tackle because of course, we have seen interest rates go up a lot over the last couple of years. So this was certainly a question that we wouldn’t have gotten probably two or three years ago because rates were so low by and large. This was not probably a great or even feasible approach for basically any situation, but certainly a reasonable question today to ask now that we have seen interest rates go up. So let’s start with the situations, just a couple where I think this type of approach could make sense.

There is a Fixed Dollar Goal

Jared Kizer: The first would be where you have literally a fixed dollar goal, an exact amount of money that you know today that is due at some point in the future. And you say, I want to set aside that amount or something slightly short of that amount entirely in fixed income to cover that goal in the future. Because I know exactly with no doubts whatsoever what the dollar amount of that goal is going to be. So that would be situation number one, where that could make sense, not necessarily a common situation, but you do see this every now and again.

Your Investable Wealth Far Exceeds Your Spending

Jared Kizer: Situation number two, also not terribly common, but a great situation for those folks that find themselves in this situation would be where you’ve got so much investable wealth relative to the amount that you’re trying to spend over time that virtually any allocation could achieve the goal that you’re trying to achieve. Again, not a situation unfortunately that a lot of folks are in, but for those that are, certainly a great situation in that case, certainly an allocation entirely in fixed income or something closely approaching, that could make sense. Now let’s talk about the balance of the cases, which are cases where I don’t think this is typically the best long-term approach to take.

Fixed Income Allocations Do Not Have the Lowest Volatility Over Time

Jared Kizer: And the reason is going to be maybe somewhat surprising is that you actually do not see historically that allocations that are entirely fixed income have the lowest volatility over time. May be a little bit surprising because you think of well wouldn’t allocating all of my portfolio to, say, U.S. Treasuries be the lowest risk approach over time or the lowest volatility approach and you actually don’t find that. What you find historically is that an allocation of, say, 5% to 10% to stocks historically has actually produced a lower volatility total portfolio than being entirely allocated to fixed income. Why is that the case? Surprising because stocks are, of course, very, very volatile. But what you see there is a basic diversification effect. You see that there are periods like 2022 and other examples that would be even better periods that are very, very difficult for fixed income, that might not be quite as difficult for stocks. And therefore you’re offsetting some of the risks of fixed income with that ever so slight allocation to stocks.

Consider Treasury Inflation-Protected Securities (TIPS)

Jared Kizer: Last thing I would say just in general, for folks contemplating very, very high percentage allocations to fixed income, you might want to consider a sizable allocation portion of that allocation going to inflation-protected securities. So hopefully that’s some helpful perspective on thinking about 100% allocations to fixed income when they might make sense, generally when they don’t tend to make sense. If you have other questions you like for us to tackle, feel free to share those with your advisor or click the link below and submit questions in that way. Thanks.

If you have any questions please feel free to drop us a note.

Interest Rate and Inflation Overview, Update and Outlook

In this episode of Buckingham Weekly Perspectives, Head of Investment Research Jared Kizer provides an overview, update and outlook on interest rates and inflation as we head into August.


Jared Kizer: I wanted to jump on and provide an update of what we’ve seen in terms of interest rates and broader inflation readings within the economy as we head here into August. And we’ve certainly seen the last couple of months interesting developments on both the interest rate front and the inflation front.

How Will the Federal Reserve Handle Interest Rates?

Jared Kizer: So let’s start with interest rates. So we’ve seen how the Federal Reserve, which through monetary policy, basically determines what short-term interest rates are in the broader U.S. economy and of course has an impact at the global economic level as well.

The Federal Funds Target Rate Has Increased

Jared Kizer: We’ve seen it now increase its federal funds target rate from 5.25% up to 5.50%. You can think of the federal funds rate as essentially the benchmark in the marketplace that sets essentially all other short-term interest rates. So if the Federal Reserve is trying to hit a target of 5.5% interest rate on that particular rate, you’re now going to see, as we do that basically all other short-term interest rates are going to be north of 5% at this point and likely in the neighborhood of 5.5% or higher. So we’re now in certainly a rate regime well above what we’ve seen over the last couple of years.

Will the Federal Reserve Continue to Increase the Federal Funds Rate?

Jared Kizer: We think about going forward. I think the go forward picture is very interesting in the sense of will we see the Federal Reserve keep increasing short term interest rates. That’s one of the biggest economic questions currently out there and very muddled at this point. Whereas over past months it’s basically been with each month with each meeting, there is a general expectation that rates were going to be increasing. I think harder to say at this point, given what we’ve seen and broader economic and inflation readings, whether we’ll see additional increases in that short-term rate. So speaking of inflation, let’s talk about what we’ve seen there over the last couple of months and generally good developments in seeing inflation moderate significantly out there in the U.S. economy. So if you look over the last two months of the months of May and June, the month-over-month inflation rates have been just a .1% in May and .2% in June. Those are very, very low month-over-month inflation readings and certainly seems to indicate that we’re seeing inflation moderate. If you look back a little bit longer and say what have inflation rates been over the trailing 12 months, not just month-over-month, the last three readings have been an annual inflation rate of 5% down to 4% and then right around 3% in June with a trailing 12 months ending June 2023.

Inflation is Moderating

Jared Kizer: So certainly they’re also indicating that we’re seeing inflation moderate and hopefully that will continue. If we look forward and say, well, given that, what does the market expect inflation to be on a go forward basis? Relatively good news there as well.

Where Does the Market Expect Inflation to Land?

Jared Kizer: So if you look into the fixed income marketplace and asked that question, generally fixed income markets are expecting year-over-year inflation even over the longer term to be in that 2% to 2.5% range. So certainly the market is saying in addition to seeing inflation moderating in past data, it expects it to be relatively low going forward from here. So hopefully that’s a good overview in terms of where we sit here in August in terms of short-term interest rates and inflation and expected inflation. If you have additional questions you’d like for us to tackle, feel free to reach out to your advisor and suggest questions in that way or click the link below and submit questions there as well. Thanks.

If you have any questions please feel free to drop us a note.

Sources: Inflation measures are the U.S. CPI Headline Inflation Rate reported by the U.S. Bureau of Labor Statistics (BLS). Federal fund rates are sourced from the Federal Reserve.

The Power of an Enrolled Agent as Your Financial Advisor

When it comes to managing finances, seeking professional guidance can be an important step. However, not all financial planners are created equal. It is crucial to consider the credentials and qualifications of the individual you ultimately decide to guide you on your financial journey.

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Ten Key Elements of a Fulfilling Retirement

While we often talk about the financial aspects of retirement, it’s equally important to consider the emotional, mental and physical facets that accompany the next phase of your life. In this episode of Buckingham Weekly Perspectives, Chief Investment Officer Kevin Grogan shares ten key elements for creating and living a fulfilling retirement.


Kevin Grogan: In most of these videos, we talk a lot about what’s going on in markets today. We’re really diving deep into the academic evidence behind how we invest client portfolios. But today I want to talk more about sort of the softer things or the softer ideas that you need to be thinking about as you move into retirement. And so what I’m going to lean on heavily for today’s video is a book titled “Your Retirement Quest” that was co-authored by Alan Spector and Keith Lawrence. And in that book, they really talk about the things you should be thinking about as you prepare to retire and they identify the ten key elements of a fulfilling retirement. So I’ll highlight each of these with just a couple of thoughts on each one. As in terms of things you should be thinking about as you move into retirement.

Key Element #1: Have a Life Purpose 

Kevin Grogan: So the first key element that they mentioned is having a life purpose. And so as you retire, you kind of move out of one phase of your life and into another. And I think it’s only natural that many of us during our working lives kind of identify our life purpose alongside what our job is. So if you are a corporate executive, that’s what you identify your purpose as. And so once you retire, of course, that phase of your life ends and you need to find a new purpose in this new phase of your life.

Key Element #2: Find your Passions 

Kevin Grogan: Pretty closely related with that first element is the second element, which is finding your passions. And so it’s very important as you move into retirement to identify what your passions are and try to pursue them as best you can.

Key Element #3: Adopt a Positive Attitude 

Kevin Grogan: The third key element is your attitude. So having a positive attitude can make a difference, both in the quality of your life and how long your life actually is. And it’s been found in academic studies that having a positive attitude can add up to seven years to your life. So it is very important as you move into retirement to continue to maintain a positive attitude as best you can.

Key Element #4: Build Financial Security 

Kevin Grogan: A fourth key element is financial security. So I won’t spend a ton of time on this one because that’s what the focus of most of our other videos is. But with financial security, really, the main key here is trying to match your lifestyle to the resources that you have available. And of course, having a good financial advisor can be very helpful in identifying what your resources are and whether or not your lifestyle matches up with the resources that you have at retirement.

Key Element #5: Give Back to Others 

Kevin Grogan: Fifth key element is giving back. And so there’s good evidence here that supports the idea that by giving back to others, it can actually have benefits to yourself. So it’s been found that retirees who spend a good bit of time volunteering actually have benefits of lower mortality rates, higher functional ability and lower stress. So all of these are benefits to volunteering, at least with some of your time over the course of your retirement.

Key Element #6: Create and Maintain Healthy Relationships 

Kevin Grogan: Sixth, is having healthy relationships. So many of us, certainly myself included, a lot of our strongest relationships are with those that you work with on a day-to-day basis. And so once you retire, you need to kind of have a plan for what those relationships will look like after you retire. So having friends, having people that you can interact with is very, very important as you move into retirement.

Key Element #7: Continue to Grow

Kevin Grogan: Seventh is growth. So it’s important to stay mentally active as you transition into retirement. So this can be helpful with, again, your quality of life over time.

Key Element #8: Have Fun 

Kevin Grogan: Eighth key element is having fun. So that might be kind of an obvious one, but it’s important to focus on having fun as you retire because that can also have health benefits as you age.

Key Element #9: Focus on Your Well-Being  

Kevin Grogan: Number nine is well-being which is it’s kind of the idea that you want to focus on your health. So focus on having good nutrition, having an exercise plan and focus on getting a healthy amount of sleep. And all of these things can contribute to having good health as you age in retirement.

Key Element #10: Create a Retirement Life Plan 

Kevin Grogan: And then the last and tenth key element is having a retirement life plan. So while it’s super important to have a diversified investment portfolio, it’s also important to have a diversified portfolio of activities that you’re doing into retirement. And I would encourage anyone who’s not yet retired to really start envisioning and thinking about what their life will actually look like in retirement and start trying it out for size even before you retire. So if you’re going to think about moving to another state, maybe spend a lot of time in that new location before you even retire to make sure that actually fits for what you want to do in retirement. So once again, the name of the book that I’m mostly leaning on here today is called “Your Retirement Quest.” I would encourage you to check that out. And if you do have any questions or anything I’ve covered, please don’t hesitate to reach out to your advisor.

If you have any questions please feel free to drop us a note.